In announcing plans to shut all coal-fired power plants by 2030, the new government of the Netherlands sent a dramatic signal to electricity markets today that no investment in coal-fired power in Europe is safe.

The Dutch statement is especially significant given that the Netherlands itself has only recently commissioned three of Europe’s newest coal-fired power plants, all completed in 2015.

The coalition-pact policy directive also states, importantly, that the government will introduce a binding target to cut carbon emissions by 2030 to put a floor under carbon prices.

No investment European in coal-fired generation is safe.

The Netherlands already presents a stark case to investors in new coal-fired generation in Europe —and further afield—in the massive write-downs Dutch utilities have made on the country’s three new coal plants.

Those write-downs, to around half the original value of the plants, indicate that the utilities affected, Engie, RWE and Uniper, will not make money on the investments in question.

The impairments reflect the impact of massive growth in renewable power in neighbouring Germany, which has depressed wholesale power prices, and the utilities having failed to foresee flat or falling electricity demand.

The Institute for Energy Economics and Financial Analysis (IEEFA) published a report last yeardocumenting how the three utilities had logged underpublicized impairments collectively worth billions of euros on the new power plants.

Today’s announcement highlights the risk of investing in either new or existing coal-fired power, and the lesson is clear: National coal phase-out plans such as this, combined with the rise of renewables and the impact on demand of improved efficiency, put old electricity-production models at risk.

Significantly, the Dutch news highlights the risks associated with costly environmental upgrades of existing coal-fired power plants to comply with recently revised pollution standards to be implemented from 2021 on.

Where power plants presently exceed the limits, utilities will have to decide whether to close those plants or invest in upgrades, a risky approach given that coal phase-outs will very likely cut short the opportunity for operators to recoup their investment on life extension upgrades.

Utilities will do well now to consider carefully whether to upgrade older and more polluting coal power plants or focus instead on more forward-looking, high-return investments, such as in digitalization, customer services and renewables.

I don’t pity any fool who invests in coal in 2017, whether in Australia or elsewhere. (Or even those still holding coal-based assets who haven’t sold them down.)

Joe

The Dutch getting out of Coal by 2030….thats 20 years ahead of Andy V and his AGL crowd. But The Dutch decision should not really be so much of a surprise. The Urgenda Foundation won a ‘climate court case’ in 2015 against The Dutch Government.

Joe

Where everyone else has said no, it is looking like China maybe the ones to bankroll Adani / Carmichael Mega Mine environmental abomination. Which sort of goes against what China is doing at home in going easy on Coal and going hard on RE. The air pollution problem in China is huge incentive for them to exit Coal.

Andrew Roydhouse

Speaking of coal-fired plants – Why is it that Qld consistently seems to run its coal fired plants at low capacity and its more expensive (to operate) gas-fired plants at high capacity?

As of this post nearly 1,100 MW of gas to just under 5,600 MW of coal-fired….

and its wholesale power price has been consistently double that of Tas, Vic or SA over the last month or so.

Must be those evil wind and large-scale solar plants operating in Qld – oh, that’s right, there aren’t any.

Malcolm M

Several of Queensland’s coal plants are out of action, most likely for maintenance because September to November usually represent the months of low demand. The units out of action include Kogan Creek (744 MW), Tarong 3 (350 MW) and Gladstone3 (280 MW). Thy Wivenhoe pumped storage hydro has been in regular use to make up for the lack of coal-fired generation.

Ren Stimpy

Thanks. The Murdoch media, talkback ranters and irrefutable Outsiders had led me to believe that all coal plants operate at full capacity 24-7/365. I guess they’re not so irrefutable after all, and I’ll have to adjust my assumptions accordingly.

Matt

I’m not sure if this is the normal trend but I noticed for a few months now generally all power flows to VIC.

QLD -> NSW.
NSW -> VIC.
SA -> VIC.
TAS -> VIC.

Sometimes of course it reverses here and there but generally this is what I see. Found that interesting. And the CO2 output goes best to worst – TAS, SA, VIC, NSW, QLD. Again, power prices seem to be cheapest in TAS, then SA, VIC, NSW, QLD. I could be wrong about how normal this is but this is what I see on Electricity Map website.

Malcolm M

The right wing in Australia decry “sovereign risk” for any such intervention by government, claiming that it will deter further foreign investment, and make Australia like a third world country. But here is an example of a first world country taking such action. The taint goes follows coal rather than the country.